COVER STORY
SPENCER RASCOFF
SVENJA GUDELL ZILLOW
units sit vacant because they were purchased by foreign investors. “It’s possible that you might see a bubble forming (or bursting) in that kind of situation,” she said, emphasizing, “In general, Miami is not in a bubble.” MAKING THE MOST OF THE DATAYOU’VE GOT When Think Realty Magazine first interviewed Gudell at the very end of 2016 for a story featuring "women to watch" in real estate, she told us that she was particularly excited about a new type of research going on at Zillow. “We’re trying to really go beyond the traditional housing metrics that are covered all over the real estate space and tracking trends of jobs, employment, everything that touches the home-buying process for the consumer,” she said at that time. Since then, she has remained dedicated to her mission of more information and better access to it, as has her team of economists and analysts. “The reason that we’re doing this and the reason that I’m excited about it is that our mission is always to empower the consumer to make better decisions. If you understand the setbacks and opportunities that people buying or renting houses, really doing anything related to housing, are dealing with, then you get a much better view of the overall economy and where the housing market is going,” she said nearly a year later. For example, shortly before that first interview, then-chief economist at Zillow and Gudell’s mentor, Stan Humphries, observed that for real estate investors, the key to success lies largely in buyer, seller, and renter priorities. “For more than a third of renters, finding a place that will allow their pets is…often cited as more important than a shorter commute,” he wrote in a Zillow Research Group report. Humphries added another note: “Buyers aren’t replacing the expertise of
S venja Gudell is unusual in the real estate sector in that she believes that most homeowners should treat their personal homes as just that, a home sweet home, rather than an investment. This may raise some hack- les, but Gudell is not saying a primary residence is not an investment. Rather, she says it should not be thought of primarily in those terms. “Your behavior changes when you think of your home as an investment,” she explained. “You make decisions that you might not make otherwise, like trying to time the market or buying more home than you otherwise would.” All those behaviors are potentially profitable when dealing with an investment property and using an objective point of view, but a homeowner may be blinded by the emotional facets of living in a home with certain amenities, square footage, or improvements. They also may encounter issues with the lack of liquidity in real estate if they find themselves needing to buy or sell fast. A member of Gudell’s team, Krishna Rao, Zillow’s director of economic product & research, broke this concept down in detail in 2014 around the time the company’s book on real estate in the wake of the housing crash, Zillow Talk: The New Rules of Real Estate, was published. “In both the housing market and the stock market, past performance is never a guarantee of future returns,” DO YOU HAVE THE MINDSET TO SUCCESSFULLY INVEST IN YOUR PRIMARY RESIDENCE?
STAN HUMPHRIES
she warned. Rao added, “Unlike stocks, it is very time-consuming to sell or buy a home. A potential homebuyer should consider that if something unexpected happens like a job loss, they might find themselves trapped with an expensive mortgage.” Zillow Talk authors Spencer Rascoff and Stan Humphries (both pictured above) dealt with the unique dynamic between an owner occupant and their primary residence in Zillow Talk. “Homes are certainly an important economic asset, but they’re also a highly personal one,” they wrote. “Real estate has an emotional dimension that other investments like stocks or mutual funds do not. When you’re buying or selling equities, you’re guided by financial sensibility, plain and simple. But when you’re buying and selling a home, other considerations come into play, like family situations, emotional attachments, and even cultural expectations.” Gudell emphasized that Americans often use their primary residence (their only residence in most cases) as a “piggy bank” for retirement, and that can be a very good thing. However, she said, it might behoove someone trying to live in an investment property as a personal home to consider other or additional investment strategies outside of the real estate sector because the emotional facet of living in the home and trying to treat it like an investment property could be too much in some cases.
In so many markets, you just will not be successful if you are not fully informed, and you will also leave money on the table.”
considerably” in 2018 as far as this specific issue is concerned. However, she added, affordability is particularly troubling in the 2018 housing market because of the imbalance between steeply rising home values and lackluster income growth. “The affordability crisis, as some people are calling it, is easy to look past because when you look at the median or the average numbers for the national market, it is easy to gloss over,” she said. “It’s when you break the issue down into subgroups that you can see who is really suffering and which sectors are likely to shift soon, either losing or gaining value.” Sometimes, the sector that is suffering is not necessarily the one at the lowest end of the price range. For example, in Miami, Florida, Gudell warned that the upper echelons of the market could be on unsteady ground. “The high end of the market in Miami is seeing a little bit of cooling in the condo market,” she observed, noting that many of these
MUCH LIKE METEOROLOGISTS, TAKE WHATECONOMISTS SAYWITHAGRAIN OF SALT. CALLINGA BUBBLE ISABITOFART ANDABITOF SCIENCE BECAUSETHEREARE SOMANYTHINGS TO WATCHOUT FOR. IT’S EASYTOMISTAKEA MARKETAS BEING INABUBBLEWHEN REALLY IT IS BEING DRIVENBYECONOMIC FUNDAMENTALS.” - SVENJAGUDELL
REFUSING TO GLOSS Gudell noted that in addition to looking for opportunities and
inefficiencies, real estate investors must also read the fine print, not just look at the big picture. “Affordability is a really big topic these days for homeowners and investors, and you need to understand not just how affordability differs from one city to another, but also from one age group to another, one demographic or ethnicity to another, one income group to another,” she said. “If you don’t understand these distinctions, you cannot offer the right products, services, or advice to your target market.” Gudell acknowledged affordability is a burgeoning problem, and she predicted that things might not “change
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